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World’s Best Banks 2012: Asia

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Asia has provided one of the few bright spots in the global economy in recent years. The region rebounded quickly from the global financial crisis and has thus far avoided the fallout from Europe’s sovereign debt problems. Expanding regional demand has boosted growth, while well-capitalized banks have sustained financial systems. But as problems persist in Western markets and China’s economy shows signs of slowing, concern over Asia’s economic prospects are growing. The Asian Development Bank and the World Bank have both downwardly revised growth estimates for the region in recent months.

The strategies of Asian banks reflect this concern. Lending continued to grow last year, but the pace slowed. Banks are shoring up capital while focusing more intently on loan quality. Most reported declines in nonperforming loan (NPL) ratios last year. Banks are also diversifying income sources, looking to non-interest income products and launching national and international expansion plans. Internet banking and electronic payment systems have reduced costs for banks and improved service for customers. As a result, most of the region’s banks are well prepared for another year of strong performance amid shaky global conditions.

REGIONAL WINNER

Standard Chartered

Asia is a now a top priority for all global banks, but Standard Chartered laid the groundwork for its success there long before the region became the hot spot for global growth. The UK-based bank has grown steadily across the region for decades. The bank has employed creative methods to reach underbanked SMEs. As an example of its unconventional approach, the bank’s Indian branch announced a partnership with Google in February to educate local SMEs about conducting business on the Internet. Standard Chartered uses its global reach to help these smaller companies expand into foreign markets, and thus the bank benefits from Asia’s increasingly active regional and global trade.

"We are in the right markets, with the right strategy"

– Peter Sands, Standard Chartered

Standard Chartered derives more than 75% of its profit from Asia. Last year, pre-tax profit in Hong Kong rose 41% to a $1.5 billion, setting a new record for any of the bank’s markets. Profits in mainland China more than doubled, while Taiwan and Asean markets saw increases of 44% and 32% respectively. The bank’s Asia business contributed to the group’s total profit of $6.78 billion, an 11% increase over 2010 and its ninth consecutive year of record high profit. “Our performance has shown that we are in the right markets, with the right strategy, and have the right leadership in place to deliver consistent value for our shareholders,” chief executive Peter Sands said, commenting on the results.

The global financial crisis affected Armenia severely, dragging the economy down more than 14% in 2009 after years of double-digit growth. The economy is now showing signs of recovery, however, and Ameriabank’s performance in 2011 reflects that renewed strength. Profits grew by 37% to $11.3 million, with its assets up by 24% and lending rising by more than 40%. Ameriabank also introduced products to allow its customers to diversify investments within the country’s borders and beyond with accounts kept in gold as well as several special accounts for investing abroad.

Despite years of steady domestic growth, ANZ has expanded abroad in recent years, which could pay off this year as the Australia economy slows and margins decrease. Profits from overseas operations rose to 13% in fiscal year 2011, which ended September 30. Last year ANZ became one of the few foreign banks authorized to settle cross-border trade transactions in Chinese renminbi and in March received a retail renminbi license in China, a first among Australian banks. ANZ Chief Executive Officer Mike Smith said, in a release: “We recognized the need to adapt to this more challenging environment early, and as a result ANZ is in a strong financial position with a strategy to take advantage of the continuing strong growth in Asia.”

The International Bank of Azerbaijan, the country’s largest bank, has struggled in recent years to keep its capital ratios in safe territory. After posting a loss in 2010, the bank returned to profitability last year, helped by a 40% increase in deposits. IBA also began the painful process of recognizing its problematic loans last year, resulting in a decrease in its capital adequacy ratio and a ratings downgrade from Fitch. This set the stage for more transparency and better collection techniques this year. The bank holds 41% of the country’s deposits and has greatly expanded its automotive financing and ATM network.

Bangladeshi entrepreneurs founded the National Bank of Bangladesh as the country’s first fully privately-owned bank in 1983. The bank has maintained that entrepreneurial spirit throughout its 30-year history, becoming the first bank in Bangladesh to offer products from Western Union and MasterCard. More recently, the bank has focused attention on expanding its lending to small and medium-size enterprises. After more than tripling its net profit in 2010, the bank continued its expansion last year, with total assets up by 25% year-on-year and profit before tax increasing by 7% to BDT9.5 billion ($116 million).

The Baiduri Bank Group has grown steadily over the years to become one of the country’s leading financial groups. The group includes Baiduri Bank as well as Baduiri Finance, and the two units work together to offer a wide range of financial products. The bank has also actively promoted the development of small and medium-size enterprises in Brunei not only through lending but also through awards, workshops and social activities. Baiduri Bank is the country’s largest issuer of credit cards and offers the widest selection of choices, including the addition of UnionPay cards in 2010. The bank also offers wealth management and remittance services.

China Construction Bank has capitalized on the country’s growth in recent years while maintaining a careful watch over the quality of its investments. In 2009, when lending surged across the country, the bank expanded its lending but limited its exposure to government financing vehicles. In the first half of last year, the bank reduced the growth rate of its total corporate lending while boosting lending to small companies by 12.5%. It saw a 31% increase in profits in the first nine months of last year, a NPL ratio of 1.02% and a deposit-to-loan ratio of 62%. It also opened CCB Life, the first insurance company owned by a big-four Chinese bank.

TBC Bank Georgia had a phenomenal 2011, with assets, lending and deposits all growing by more than 45%. Net profit soared 85%. Interest income provided much of the growth, but commission and fee income rose rapidly, up 30%, largely from the bank’s card business. With its acquisition of Constanta Bank, TBC expanded into the microfinance segment. The bank has used its ATM and Internet banking platforms to improve access for its clients and reduce costs for the bank. As an example, customers can pay utility bills and make loan payments through TBC pay terminals without waiting for bank tellers. TBC also introduced new programs on customer relationship management and invested a record-high GEL12.6 million ($7.7 million) in technology last year. Three-fourths of the bank’s total noncash transactions were completed over the Internet last year, up from only 45% in 2009.

ICICI Bank is India’s largest private sector bank and one of the industry’s most innovative financial companies. ICICI regularly brings new investment products to the Indian market, most recently the country’s first rupee credit default swap. Last year the bank launched a service allowing customers to withdraw money at point-of-sale terminals and introduced a dual platinum credit card offering benefits from both American Express and MasterCard. Both were firsts for the Indian market. This year the bank has expanded its mobile phone payment services and launched a Facebook page that allows users to check their account information through Facebook. ICICI Bank reduced its nonperforming-loan ratio to 0.70% as of December 31, down from 1.16% a year earlier. The bank’s innovative approach and attention to quality lending boosted net profits 29% year-on-year in the nine months ending in December.

Indonesia’s economy has grown steadily in recent years, even as the global economy has struggled. Bank Central Asia has capitalized on that growth while carefully maintaining the quality of its loan portfolio, an especially difficult task in a country that has struggled with corruption. In the first nine months of 2011, profit rose 25.3%, with the NPL ratio dropping to just 0.3%. Assets increased by 17% and loans by 27%. The bank introduced several products last year, including a platinum card offering travel discounts and Starbucks coffee at the airport and savings accounts and special cards for its younger customers. In January the bank launched an electronic payment system called BCA KlikPay to facilitate online shopping.

Mitsubishi UFJ, Japan’s largest financial services company, expanded its international presence and deepened its partnerships in response to a difficult year for Japanese banks. In the first half of Japan’s fiscal 2011, which ended in September, the bank reported its highest level of interim net profit since the bank was formed in 2005. Profit almost doubled to JPY696 billion ($6.4 billion). Much of that profit came from the conversion of preferred stock of Morgan Stanley into common stock. Factoring out the transaction, the bank still increased profits by JPY48.6 billion over the same period last year. The bank has continued to strengthen its relationship with Morgan Stanley, offering its support for Morgan Stanley’s recent bid to buy Citigroup’s stake in a joint-venture wealth management firm. The bank also saw increased revenue from other parts of Asia and purchased US-based Pacific Capital Bancorp through a US subsidiary.

The global financial crisis had severe consequences for Kazakhstan’s banks, prompting restructuring and government bailouts throughout the sector. Halyk Bank, which sold a 19.8% stake in the bank to the government in the wake of the crisis, is showing signs of revival. In the first nine months of last year, profits rose by 8.2% and commission and fee income increased by 34.5%. The bank earlier this year merged its investment banking and financial services subsidiaries and plans to expand its offerings of financial products to include insurance, asset management and leasing. Although overall Halyk has outperformed its domestic competitors, the country’s recovering economy will likely attract more foreign competition in the coming years.

Demir Kyrgyz International Bank greatly expanded its lending portfolio and utilized its market-leading position in the credit and debit card business to increase its after-tax profits by an astounding 153% in 2011. The bank improved its electronic payment systems and extended its point-of-sale network, already the country’s largest, while adding more than 7,000 online banking customers, an increase of 73%. Despite the tremendous growth, the bank’s NPL ratio fell to 1.6%, compared with the industry average, which is above 10%. In 2012 the bank plans to build on its 55% market share in the cards business by adding MasterCard to its product line. Recent agreements with the International Finance Corporation and the European Bank for Reconstruction and Development will help the bank strengthen its lending to large corporate clients and SMEs.

ICBC Macau diversified its product line significantly in 2011, contributing to a 23% increase in assets and 40% rise in profits, while reducing its NPL ratio to 0.08%. ICBC Macau last year became the only local renminbi clearance center and expanded its investment options in precious metals. In the fourth quarter, ICBC Macau became the first bank in the world to offer the UnionPay dual currency QuickPass card, which allows its users to purchase products and pay for services in Macau and mainland China without needing a pin number or a signature. The bank also initiated a service allowing mainland customers to set up accounts through ICBC’s branch network in China without traveling to Macau. Through this service, mainland Chinese customers can more easily access international markets, an attractive feature for high-net-worth clients.

In May of 2011, Hong Leong Bank merged with EON Bank Group, resulting in expanded product offerings and a banking network of 329 branches and over 1,400 self-service terminals. The merger topped an already strong fiscal year 2011, which ended on June 30, in which Hong Leong saw its profits increase by 16%, discounting the contributions from EON. With the merger, the bank’s market share grew from 4.7% to 8.9% as of last June, with an especially pronounced increase in lending to small and medium-size enterprises. In the second half of the calendar year, Hong Leong saw its after-tax net profit rise 43% year-on-year. “The success of the merger lies in the momentum we have built in the enlarged Bank and the integration process that has yielded results within six months of vesting. The group’s earnings reflect an increased diversification of business activities, growing national presence and resilience to challenges that may emanate from headwinds in the global economic environment,” wrote group managing director and chief executive Datuk Yvonne Chia in the results announcement.

Mongolia’s economy grew an unprecedented 17.3% in 2011, and Golomt Bank capitalized on that growth to increase its assets by 35%. Customer deposits rose 40% and lending expanded by 59%, with net profit up 55%. SME, consumer and mortgage loans all more than doubled. So did the number of mobile banking and online banking customers. Despite the growth, the bank reduced its nonperforming loan ratio to only 2.0%, compared with an industry average of 7.0%, while keeping its loan-to-deposit ratio at an industry low 67.6%. Golomt was also active in investment banking, acting as the sole arranger and provider of a $21.6 million credit agreement with Mongolia’s national aviation carrier and serving as the local financial adviser for the IPO of state-owned mining company Erdenes Tavan Tolgoi.

Despite its small size, Kiwibank has steadily made progress in winning customers over from its multinational competitors. In the six months ending in December, client deposits rose 13% and lending expanded by 10%. Interest income soared 38%, pushing net profit to $38 billion, almost triple the $14 billion reported for the same period in 2010. The bank’s parent company, state-owned New Zealand Post, also injected $50 million into the bank in December, setting the stage for Kiwibank’s acquisition of Gareth Morgan Investments in January. The purchase of GMI will help Kiwibank grow its wealth division, according to the bank’s press release.

HBL Pakistan became the first bank in Pakistan to reach the 1 trillion rupee mark after increasing its asset base by almost 20% last year. The bank’s overall profit rose 33% to PKR20.74 billion ($228 million), the highest in the industry. The bank widened its branch network, already the country’s largest, with the acquisition of Habibsons Bank in April of 2011. HBL captured around 25% of the country’s total remittance business, and that business will likely expand with the growth of HBL’s international network, which currently includes 42 branches in 25 international locations. Technological updates improved the bank’s cards business, and 200 new ATMs will join the bank’s network of more than 500 this year.

Economic growth slowed in the Philippines last year after a rapid rebound from the financial crisis in 2010. The slowing had little impact on Metrobank, however, the country’s second-largest bank by assets. According to preliminary results, net income rose by 32% to $11 billion ($257 million) and total assets increased by 8% to $958 billion ($22.3 billion). Income from services, commissions and fees increased by 12.5%, while higher lending on improved margins contributed to higher interest income. The bank also improved its NPL ratio from 2.9% to 2.2% while increasing its total capital adequacy ratio to 17.4%.

In 2011, DBS Bank became the first bank and only the second company in the history of Singapore to surpass the SGD3 billion ($2.4 billion) profit mark. The 15% growth in profit came despite decelerating growth in the city-state’s economy. Singapore grew by only 4.9% in 2011 after a record-breaking 14.8% increase in GDP in 2010. DBS bank leads its competitors in mortgage lending, auto loans and credit and debit cards, and solidified its top position last year by expanding its network from 80 to 140 branches through an alliance with Singapore Post. The bank has improved customer service in the past two years and estimates that those efforts have shaven off 157 million hours of customer wait time. The bank is also expanding quickly in overseas markets and benefiting from the growth in regional trade and investment.

Korea Exchange Bank has an extensive international network and leads the market in trade finance and foreign exchange. In January, regulators approved the purchase of KEB by Hana Financial Group, one of the largest domestic financial companies. The purchase will provide domestic opportunities for KEB and an avenue for international expansion for Hana. KEB implemented numerous technological upgrades last year to streamline the bank’s operations and increase its online business. The bank has already introduced several trade finance products this year, including services to simplify export bill of exchange transactions. KEB’s 2011 profit rose 47%, driven by increased total income and the sale of the bank’s shares in Hyundai E&C.

Commercial Bank of Ceylon is Sri Lanka’s largest bank in terms of assets and market capitalization, a position strengthened by its performance in 2011. The bank’s assets grew 19% last year and profits rose 47%. The bank increased its Tier 1 capital by 30% and pushed its NPL ratio down to 3.4% while opening a record-high 27 new branches and installing 100 new ATMs last year. The bank has recently launched Islamic finance projects, introduced the first Chinese renminbi-denominated transaction capabilities and expanded its remittance services. CBC has also implemented new technology to improve its credit risk evaluation, customer service, online banking and point-of-service transactions. “Our success has been mainly due to our focus on commercial banking with balanced exposures to the retail and the corporate sectors and strong segmentation of the personal sector,” CEO Ravi Dias told Global Finance .

In Taiwan’s crowded and competitive banking industry, Chinatrust Commercial has risen to become the largest privately-operated bank, credit card issuer and mutual fund provider and claims the most Internet banking customers and ATMs in Taiwan. In 2011, Chinatrust increased its assets by 5.5% and net profit by 28%. The bank has 67 overseas outlets and plans to open its first Shanghai branch this year. Already Taiwan’s leading wealth management provider, Chinatrust opened its first private bank in April. For its SME business, Chinatrust employs innovative relationship management and risk control techniques and is planning an online platform to facilitate cross-border transactions across the region.

Siam Commercial Bank had another strong year in 2011, with an especially pronounced effort to improve its asset quality. Through NPL sales, improved collection practices and stronger risk control policies, the bank decreased its total NPL ratio from 3.25% to 2.62%. The improved quality benefited the bank’s bottom line, with net profit rising 50%. In March of last year, the bank doubled the size of its stake in Siam Commercial New York Life and now owns almost 95% of the company. The bank’s net income from fees and insurance premiums rose by 26.8%, with income from global market and transactions services up by 51% year-on-year.

Bank Credit-Standard had a phenomenal 2010 and kept up the momentum in the first half of 2011. The bank increased its profit by 22% year-on-year in the first half of 2011, and its corporate customer base grew by 18%. As a joint stock commercial bank operating in the state-dominated sector, the bank has built a reputation for offering innovative products. As an example, the bank has in recent years set up a series of leasing and special loan agreements to finance large construction projects. In January of this year, Bank Credit-Standard suspended its cooperation with Visa, raising doubts about the long-term financial health of the bank.

Excitement over Vietnam’s economy is building again as inflation figures have slowly fallen and growth has remained strong. The country’s big banks are sharing in that excitement, with impressive numbers across the industry. Techcombank stands out, however, for its consistently strong growth in terms of assets and net profits. The bank’s total assets increased from VND39.5 trillion ($1.9 billion) in 2007 to VND181 trillion last year. During the same five-year period, profit rose by an average annual rate of 72% to reach an industry record of VND4.2 trillion. The bank added 67,000 companies and 2.3 million individuals to its list of clients last year alone, increases of 47% and 67% respectively. Meanwhile, the bank’s popularity with depositors pushed its loan-to-deposit ratio to only 64.3%. “It is very pleasing for Techcombank to receive this award,” said CEO Simon Morris. “I would like to thank our highly committed staff and loyal customers for making this possible and look forward to our continued partnership in the future.”